English regulator ‘will not bail out’ struggling universities

The chair of England’s sector regulator has made clear that it will not “bail out” universities and other providers in financial trouble.

Sir Michael Barber, the Office for Students (OfS) chair, writes in The Daily Telegraph that “bailouts would neither be good for students nor fair for taxpayers”, adding that universities must “become much better at managing their affairs”.

Rumours have been circulating in the sector that a small number of institutions are facing serious financial difficulties. Times Higher Education’s analysis of English universities’ finances in 2016-17 has shown that deficits at individual universities ran as high as £14 million, and up to nearly 9 per cent of total income.

Of the 10 large English universities with the biggest deficits as a proportion of total income last year, six also figure in the top 10 institutions seeing the biggest falls in recruitment between 2010 and 2017. Student number controls began to be lifted in 2012, before a fully unrestricted market in student recruitment was introduced by then chancellor George Osborne in 2015.

Sir Michael writes that the onus is on universities “to plan realistically and respond quickly where demand is higher – or lower – than expected. We have heard from several vice-chancellors that if they misjudge decisions about student numbers, courses offered and facilities built, and get into financial trouble, ‘ultimately it will be OK because the Office for Students will bail them out’. This is not the case. We will not bail out universities or other course providers in financial difficulty.”

He adds: “This kind of thinking is reminiscent of the ‘too big to fail’ idea among the banks that caused the 2008 crash. It will lead to poor decision-making and a lack of financial discipline. It is inconsistent with the principle of university autonomy and is not in students’ longer-term interests. Indeed it would be irresponsible to give more public money to people who are demonstrably unable to manage their institution in a sustainable way.”

It is not clear from the article whether Sir Michael believes examples of support for universities under the OfS’ predecessor organisation, the Higher Education Funding Council for England, amounted to “bailouts”.

Sir Michael also says that student protection plans “set out how a university will protect all its students if they are threatened by course, campus or provider failure. Our core principle is that students should be able to continue and complete their studies where they want. If this is not possible, they should be compensated.”

He concludes: “Recent media coverage has focused on the possible failure of a few universities. But there are many more success stories: world-class institutions that are hugely in demand not just from UK-based students but from across the world. We have much to celebrate and, as a regulator, we are determined to ensure our universities and colleges maintain and build on that reputation, so that every student receives the education they deserve.”

The University and College Union said that it would be writing to all MPs with a university in their constituency to ask them whether they would be happy to see the OfS allow the institution to go bust.

Matt Waddup, the union’s head of policy and campaigns, said that allowing a university to collapse would have “consequences far beyond just education” as they are often one of the key employers in the area.

“The regulator and government should be supporting universities to excel, not washing their hands when things don’t go to plan,” Mr Waddup said. “Michael Barber’s comments demonstrate just how out of touch those in charge of our universities really are.

“You don’t protect students’ interests by bringing about the demise of their local university. It would not simply be a case of students moving to another university if theirs were to experience financial trouble.”

john.morgan@timeshighereducation.com